Forums

[Tyrone Slothrop]

Originally Posted by sebastian_dangerfield

I get that. My point was not whether the supply was increased, but who has the liquid. BOA gets the liquid to lend, and one of the primary aims is to get it to lend that money to businesses or refi mortgages... or anything else that creates domestic economic activity. But that isn't going to happen for the reasons I noted above. Hence, the money goes abroad: http://www.bloomberg.com/news/2010-1...-stimulus.html http://www.ft.com/cms/s/0/46c65ec8-d...44feabdc0.html

It increases BofA's liquidity only relative to a hypothetical world in which they can't sell their bonds to anyone else, but no one thought that was the world we're in. The key is that if anyone else had bought the bonds, they would have had to tie up other assets to do so, but not the Fed, increasing the supply of money.